A Not So Sweet Settlement: Court Upholds Consent Judgment
In the recent Ontario Superior Court of Justice decision of Abdullah v. Mursal, 2025 ONSC 4647, the court addressed the complex legal implications of insurance settlements made without the insured’s direct consent.
Background Information
In September 2017, Fathi Mursal was operating a motor vehicle in Scarborough, Ontario. As he was making a left turn, Mr. Mursal’s vehicle was t-boned by an ice cream truck. Mr. Mursal was charged under the Highway Traffic Act for not making a left turn safely. He pleaded guilty and paid the fine.
Three separate tort actions were commenced in relation to the accident:
- Mr. Mursal’s passenger, Nabeel Abdullah, (and his parents) sued Mr. Mursal. The owner (Donkey Kone Inc.) and operator (Demetre Apostolou) of the ice cream truck were also named as Defendants.
- Mr. Mursal sued Donkey Kone Inc. and Mr. Apostolou, alleging that Mr. Apostolou was driving negligently at the time of the accident.
- Mr. Apostolou sued Mr. Mursal.
Mr. Mursal was insured under a standard automobile insurance policy issued by Intact Insurance (“Intact”). The third party liability limit was $1 million.
In the actions where Mr. Mursal was a Defendant, Intact appointed a defence lawyer to defend Mr. Mursal (“Intact Defence Counsel”). However, given that the claims against Mr. Mursal exceeded the third party liability limits available under the Intact policy, Intact Defence Counsel advised Mr. Mursal that he may wish to hire his own lawyer. Mr. Mursal was represented by his own personal lawyer in the action where he was Plaintiff, but Intact Defence Counsel was the only solicitor of record in the actions involving Mr. Mursal as Defendant at least until July 2023.
The Settlement
On April 10, 2023, the parties participated in a mediation. During the mediation (or shortly thereafter), settlements were reached in the actions involving Mr. Mursal as Defendant, whereby Intact would contribute the full $1 million third party liability limits of Mr. Mursal’s policy:
- Mr. Abdullah and his parents would be paid $2,400,000. Intact would contribute $940,000 on behalf of Mr. Mursal, with the remaining $1,460,000 contributed by Donkey Kone Inc. and Mr. Apostolou.
- The action commenced by Mr. Apostolou would be settled for $215,000. Intact would contribute $60,000 on behalf of Mr. Mursal.[1]
Donkey Kone Inc. and Mr. Apostolou denied liability for the accident, but agreed to contribute the majority of settlement funds for the Abdullah action as the third party liability limit under their policy was $5 million. However, a term of the settlement in the Abdullah action was that the crossclaims between the Defendants would continue. Thus, Donkey Kone Inc. and Mr. Apostolou could pursue Mr. Mursal personally for contribution and indemnity for any amounts they contributed to the settlement beyond their proportionate share of liability.
It seems Mr. Mursal only learned about these settlements when his personal lawyer in his Plaintiff action received an email after the settlements had been negotiated. Shortly thereafter, Mr. Mursal’s personal lawyer advised that Mr. Mursal did not agree to the proposed settlements. The settlements nevertheless moved forward, and, on July 25, 2023, the court issued a consent judgment consistent with the settlement terms. Intact Defence Counsel gave consent on behalf of Mr. Mursal.
Motion to Set Aside Consent Judgment
Mr. Mursal brought the subject motion to set aside the consent judgment, but it was dismissed. In reaching her conclusion, Shin Doi J. determined that, pursuant to the terms and conditions of the standard Ontario Automobile Policy, Mr. Mursal had irrevocably appointed Intact to act on his behalf, which gave Intact Defence Counsel authority to settle the Abdullah action. Moreover, the terms and conditions of the standard Ontario Automobile Policy prevented Mr. Mursal from interfering in the settlement.
Shin Doi J. also found that that the settlement of the Abdullah action was within the scope of authority of Intact Defence Counsel. She noted that Mr. Mursal’s interest and Intact’s interest were able to co-exist since the settlement contribution by Mr. Mursal was within the $1 million policy limit and liability was not admitted. She nevertheless recognized that their interests would conflict in the defence of the crossclaims since the global settlement exceeded Mr. Mursal’s policy limit.
Mr. Mursal was also unable to satisfy the tests to set aside consent judgment under the Rules of Civil Procedure. With respect to rule 37.14 (motion to set aside or vary an order), Shin Doi J. noted that the motion for consent judgment was made on notice since notice was provided to Mr. Mursal through the Intact Defence Counsel. Shin Doi J. also found that Mr. Mursal’s personal lawyer received notice of the pending motion. Mr. Mursal’s personal lawyer was not served with the motion record or granted an opportunity to file submissions, but he did not fail to appear through accident, mistake or insufficient notice.
Shin Doi J. also determined that Mr. Mursal did not meet the requirements to set aside or vary the order under rule 59.06(2) as there was no fraud or facts arising or discovered after the consent judgment was made.
Mr. Mursal argued that Intact Defence Counsel should have included his personal lawyer in the settlement. Shin Doi J. declined to make any finding in that regard as it was an issue in a separate negligence action commenced by Mr. Mursal against Intact Defence Counsel. Shin Doi J. nevertheless noted that “[q]uestions do arise about the communications by the defence lawyer appointed by the insurer to Mursal’s personal lawyer, and the steps taken by the defence lawyer.”
Shin Doi J. agreed with Mr. Mursal that the consent judgment had a prejudicial effect on Mr. Mursal, but noted that contribution and indemnity in the crossclaim had not yet been determined. Moreover, the Negligence Act required a defendant claiming contribution and indemnity to satisfy the court that the settlement was reasonable. Where the amount was excessive, the court could fix the amount at which the claim should have been settled.
Ultimately, Shin Doi J. concluded that it was not in the interests of justice for the consent judgment to be set aside since doing so would prejudice the Abdullah plaintiffs and the Defendants Donkey Kone Inc. and Mr. Apostolou where those parties expected finality after agreeing to a valid and authorized settlement.
Conclusion
The court’s decision in Abdullah v. Mursal underscores the broad authority insurers possess under Ontario’s standard automobile insurance policy to settle claims within policy limits, even without the insured’s agreement. While the ruling affirms the finality and enforceability of such settlements, it also highlights the potential vulnerability of insured defendants when claims exceed their coverage.
The continuing negligence action against defence counsel suggests unresolved concerns about communication and representation, raising important questions about the duties of insurer-appointed lawyers. Ultimately, the case serves as a cautionary tale for insured parties and legal professionals alike about the complexities that arise when insurance, liability, and litigation strategy intersect.
[1] Although not stated by Shin Doi J., it seems the remainder of the settlement was paid by Certas Home and Auto Insurance Company and/or Economical Mutual Insurance Company, as both appear to have been Defendants in the action commenced by Mr. Apostolou.